As 2017 winds down, the Phoenix, AZ housing market is up, with positive trends that make this year one of the best in the region. The year 2005 saw huge inflation but housing prices bottomed out in 2011,after the housing market collapse in 2008.
Home sales have increased 9 percentover last year’s figures. The median price per square foot has gone from just over $135 in August 2016 to $148 in August 2017. It’s also a good time to sell new homes. The median sales price for residential properties this summer rose to $221,000. Phoenix rent prices are also up, going from a median of $1,300 to $1,395.
Job Opportunities & Canadian Investors Influence the Phoenix Market
New residents are moving to Phoenix from other parts of the country to find employment, leading to an increased demand for new homes. Most transplantschoose to buy property after renting for a year.
This has also provided a boon for Canadian investors who purchased homes for less than $100,000 after the market crash. They can now sell their properties for a profit. Canadians invested around $19 billion in American homes last year. That’s more than twice the $9 billion they spent in 2015.
Rising property values means that Canadians are selling properties but not buying them. Mike Orr, a Phoenix-area housing analyst, reported than Canadians bought 36 homes in the Valley in June 2016. That number went up to 44 homes in the same month this year. Those are very low numbers compared to previous years. The same month in 2015 saw 70 Canadian home purchases, with 126 in 2014. The number goes up over the past several years, rising to 421 homes in June of 2011.
Shifting currency values and a housing market rebound have discouraged Canadians from investing new cash in the Phoenix market. According to The Information Market expert Tom Ruff, for every one Canadian-based buyer there are nine more who are selling.
Phoenix Prepares for a Rise in Housing Prices
Current conditions in Phoenix are pushing housing prices up. There’s a worker shortage in the region, with more open jobs than there are tradespeople available to fill them. That is good news for those in the industry because it means higher wages and less competition.
For buyers, it also means an increase in home prices. Land costs are also increasing, making it even more expensive for builders to create new structures. Home construction costs have grown between 25 percent and 30 percent over the past two years. Estimates indicate that this will translate to an increase of 5to 7 percent in new home prices in 2018.
Families interested in building in the metro area can expect a median home price of $302,000 while existing properties come in at $247,000. The market’s future will rely heavily on whether or not home buyers are willing to pay the higher cost of buying in Phoenix, AZ.
Homebuilding was one of the metro area’s biggest economic influencers before the housing crash. Seeing the industry grow again would be beneficial to the region. Only around 19,000 new homes were constructed last year, which is about half of what would be seen in a healthy market.
Millennials Dive into Homeownership
With rental rates going up, younger residents are choosing to make the change to home ownership. The only thing in their way is coming up with the down payment. Apartment List surveyed24,000 renters in the U.S., including thousands of millennials in the Phoenix area. Of those,83 percent responded stating that they plan to buy a home in the future, but 75 percent were waiting for better financial stability.
Phoenix millennials will require an average of just over 13 years to save a 20 percent down payment. While some millennials will need the full 20 percent to buy, many can take advantage of lower down payments with FHA loans for first-time buyers. FHA financing requires 10 percent or less down, sometimes going as low as 5 percent.
Phoenix Home Inventory Creates Bottleneck for Growth
Phoenix, AZ is considered by many to be one of the hottest housing markets in the country but low inventory may create a bottleneck that could slow growth. Low supply is making it harder for buyers to find properties. It’s also causing property values to rise. Housing inventory saw a 7.1 percent decrease in mid-summer. The markets are bustling, but fewer available homesleave buyers with limited options. That also means buyers must act quickly to buy a home before someone else grabs it out from under them.